50 Multiple Choice Business – Finance Questions
I need help answering 50 multiple choice Business – Finance Questions.
1. Which of the following is NOT a cash flow that should be included in the analysis of a project?
a. Changes in net operating working capital.
b. Shipping and installation costs.
c. Cannibalization effects.
d. Opportunity costs.
e. Sunk costs that have been expensed for tax purposes.
2. When evaluating a new project, firms should include in the projected cash flows all of the following factors EXCEPT:
a. Changes in net operating working capital attributable to the project.
b. Previous expenditures associated with a market test to determine the feasibility of the project that have been expensed for tax purposes.
c. The value of a building owned by the firm that will be used for this project.
d. A decline in the sales of an existing product that is directly attributable to this project.
e. Salvage value of assets used for the project at the end of the project’s life.
3. A company is considering a proposed expansion to its facilities. Which of the following statements is CORRECT?
a. In calculating the project's operating cash flows, the firm should not deduct financing costs such as interest expense, because financing costs are handled by discounting at the WACC. If interest was deducted in the cash flow estimation, it would thus be “double counted.”
b. Since depreciation is a non-cash expense, the firm does not need to know the depreciation rate to calculate the operating cash flows.
c. When estimating the project’s operating cash flows, it is important to include any opportunity costs and sunk costs, but the firm should ignore cash flows from externalities since they are accounted for elsewhere.
d. Capital budgeting analysis should be based on before-tax cash flows.
e. Since depreciation is a cash expense, the firm should consider depreciation rates when calculating operating cash flows.
4. Laurier Inc., a household products firm, is considering
1. Which of the following is NOT a cash flow that should be included in the analysis of a project?
a. Changes in net operating working capital.
b. Shipping and installation costs.
c. Cannibalization effects.
d. Opportunity costs.
e. Sunk costs that have been expensed for tax purposes.
2. When evaluating a new project, firms should include in the projected cash flows all of the following factors EXCEPT:
a. Changes in net operating working capital attributable to the project.
b. Previous expenditures associated with a market test to determine the feasibility of the project that have been expensed for tax purposes.
c. The value of a building owned by the firm that will be used for this project.
d. A decline in the sales of an existing product that is directly attributable to this project.
e. Salvage value of assets used for the project at the end of the project’s life.
3. A company is considering a proposed expansion to its facilities. Which of the following statements is CORRECT?
a. In calculating the project's operating cash flows, the firm should not deduct financing costs such as interest expense, because financing costs are handled by discounting at the WACC. If interest was deducted in the cash flow estimation, it would thus be “double counted.”
b. Since depreciation is a non-cash expense, the firm does not need to know the depreciation rate to calculate the operating cash flows.
c. When estimating the project’s operating cash flows, it is important to include any opportunity costs and sunk costs, but the firm should ignore cash flows from externalities since they are accounted for elsewhere.
d. Capital budgeting analysis should be based on before-tax cash flows.
e. Since depreciation is a cash expense, the firm should consider depreciation rates when calculating operating cash flows.
4. Laurier Inc., a household products firm, is considering